European Banking Federation President Alessandro Profumo yesterday (12 July) offered to set up a voluntary €20 billion rescue fund for failing banks funded by the top 20 EU credit institutions. Although the move follows Brussels’ push in this direction, the European Commission reacted warily to his announcement.

Profumo’s plan aims to satisfy Brussels’ requests to avoid making taxpayers foot the bill for rescuing failing banks, as they were forced to do during the last US-born financial crisis, the widespread consequences of which are still being felt by European economies and households.

In exchange for his offer, Profumo hopes to prevent banks from being forced to establish compulsory privately-funded rescue funds, as originally proposed by EU Internal Market Commissioner Michel Barnier.

Profumo, who is CEO of Italian group UniCredit – one of the biggest cross-border banks in Europe, with sizeable operations in Germany and many Eastern European countries – launched his idea in the pages of the Financial Times.

His proposals carry more weight since he is currently also president of the influential European Banking Federation (EBF), which brings together all the major banks in Europe.

According to his plan, the top 20 European cross-border banks would voluntarily set up a €20 billion fund to help each other when necessary, thus avoiding the need to request help from public authorities, as many banks have been forced to do recently.

His offer represents a surprising compromise, since EU-wide consensus on the issue is far from certain (see ‘Background’).

Confirming the controversial nature of his approach to the dossier, top German banks reacted in a lukewarm manner to Profumo’s proposals, according to sources quoted by news wires.

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